The History Of Equipment Leasing

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The advantages of leasing equipment have been acknowledged for millennia, the first recorded application of it is dating back to 2010 b.c. in the Sumerian city of Ur. Priests of Ur rented land and farming equipment to agricultural workers, etching the agreements in clay tablets. Equipment Financing documents have also been discovered in other empires such as Babylon, Egypt, Greece and Rome. The ancient Phoenicians structured a more modern lease in the leasing out of ships, which were more susceptible to depreciated value or destruction.

In America, it was first adopted in the 1700’s. Transportation equipment dominated the leasing world for two centuries, beginning with horses, buggies and wagons in the early 18th century to barges, railroad cars and locomotives in the late 19th century. The 1870’s in particular saw an important transformation in the process with the introduction of what is now termed a true lease, allowing the lessor to retain the equipment at the end of the lease.

Continuing into the 20th century, economic progress in the early 1900’s generated an increased attraction towards equipment leasing. Many citizens during the 1920’s enjoyed the lending market to obtain what they could not immediately afford. Manufacturers took advantage of lending opportunities, making sales more attractive to customers by offering leasing plans with payment installations.

During World War II, many factors contributed to the evolution of equipment leasing in America. Machinery was required for arms production which would be unnecessary during peace time after the war, increasing the demand for leasing. The necessity of affording extra costs associated with equipment lead to the development of operating leases, in which equipment such as a truck would be leased conjointly with a skilled operator. Long term true leases began to grow with the railroad industry.

Postwar progress saw the creation of the first corporation dedicated primarily to leasing in 1954, the U.S. Leasing Corp. Consequently, the options were refined to provide flexibility for customers and cater to their needs. Vendors began to understand the benefits of leasing their equipment to customers through third party corporations or in-house programs. Related finance laws started to change and adapt to meet the rising demand for equipment financing.

Today, equipment leasing is an important industry, having grossed $218 billion dollars in 2004. It evolved from a “last resort” financing option to one which vendors in any industry may take advantage of, from high-tech industries to construction companies. Several companies use this as a primary method of financing their equipment. About 85% of businesses in America today lease equipment, and with continued advancements in the financial market the industry continues to rise.


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